Kenneth Andrade Predicts Stock-Picker's Market in 2026 with Focus on Underperforming Sectors

Kenneth Andrade, Founder and CIO of Old Bridge Mutual Fund, believes 2026 will be defined by patience, selective stock-picking, and investing in sectors that have underperformed recently. He emphasizes that investors need to focus on capital protection first and growth later, advocating for a strategy of buying undervalued assets rather than chasing momentum in an environment marked by time correction rather than dramatic market movements.

Market Outlook and Valuation Correction

Andrade notes that Indian equities have completed an exceptional run between 2020 and 2024, and expects more sideways movement in 2026 following a sluggish 2025. He points out that India had become the most expensive market among global peers, and valuations are now undergoing a time correction rather than a sharp price decline.

The fund manager expects another six to seven months of range-bound markets with single-digit returns. He observes that market breadth has already weakened with more losers than gainers, despite indices holding up relatively well.

Investment Flow Dynamics

Flow patterns remain central to the current market narrative. Andrade explains that while domestic investors continue allocating to equities due to their constraint to the local market, foreign institutional investors have no such compulsion and will only return when valuations become more attractive.

Sector-Specific Investment Strategy

Andrade advocates investing in sectors where performance has been poor recently rather than where optimism is already evident. His sectoral outlook includes several key areas:

Information Technology: The sector has returned to reasonable valuations but represents more of an allocation trade than a growth business currently.

Banking: Large banks appear reasonable on valuations with some growth visibility and controlled downside risk.

Pharmaceuticals: Manufacturing-led pharmaceutical companies are approaching the bottom of their earnings cycle, hurt recently by key products going off patent. However, Andrade expects industry profitability to improve dramatically as capacities are in place and patent expiries create opportunities for Indian generics.

Emerging Sector Opportunities

Several sectors show promise based on recent developments and cyclical positioning:

• Metals: Already showing positive momentum aided by higher volumes and stronger commodity prices
• Automobiles: Continuing to see momentum driven by discretionary spending, though Andrade characterizes it as a mature business with limited dramatic growth potential
• Telecom: Supported by strong cash flows, recent price increases, and improving profitability

Market Environment and Government Role

Andrade describes the current geopolitical environment as uncertain, expecting a continuation of patterns seen through 2025. He suggests investors will need to "play it by ear" rather than attempt to predict outcomes in this unclear environment.

Government spending is likely to come to the forefront in the coming quarter, even as the market remains trendless. Consumption and BFSI sectors have already priced in much of the policy-led optimism from the previous quarter, making them more stock-specific stories than category-wide opportunities.

Investment Approach for 2026

For investors navigating this environment, Andrade's strategy remains straightforward: identify industries that have struggled for several years, purchase them at sensible valuations, and maintain patience for cyclical reversals. This approach emphasizes selecting underperforming sectors and waiting for cycles to reverse rather than chasing current market momentum.